As hospitals and health systems respond to more aggressive patient and payer demands for lower cost surgical options, the number of hospital outpatient departments (HOPDs) converting to freestanding joint-venture ambulatory surgery centers (ASCs) and hospitals and health systems opening new joint-venture ASCs continues to increase.
These joint ventures often involve a partnership between the hospital and physician investors as this can increases cases, enhance physician-hospital relationships, and reduce cost. In hospital-physician ASC joint ventures, both partners share financial risks and responsibilities as well as provide shared leadership for the ASC. What is expected of the partners in such a collaboration?
Hospital partners tend to have a strong ability to attract additional physicians to the ASC. The hospital is experienced in developing community-based healthcare services and dealing with regulatory agencies. They have established community relationships, such as financing institutions, politicians and business leaders which can often be leveraged for the benefit of the ASC. Hospitals have existing managed care contracts that may be converted from HOPD to the new ASC. The hospital is also able to share key services with the ASC via contractual agreements, which can include employee health, human resources, infection control and credentialing.
Meanwhile, physician partners' practices will provide patient volume to the ASC. They also have community relationships with managed care providers and employers. Physician ASC investors already support the hospital by performing their surgeries at the hospital/HOPD. Through their community relationships with peer groups, they may attract additional physicians to bring their surgeries to the ASC or healthcare system.
Both partners need to understand that there are differences in managing an ASC compared to the management of a hospital/HOPD and a physician's practice. To achieve financial success in coordination with excellent patient care requires collaboration from and commitment by the partners. This extends to the ASC's revenue cycle — one of the most critical but often underappreciated issues requiring strong understanding and buy-in from the partners.
The following examines areas affecting revenue cycle that may require a different approach than those found in an HOPD or physician practice.
1. Management. One of the largest hurdles a new joint-venture ASC may face is that the hospital often wants to run the ASC like a hospital or its former HOPD, relying on hospital departments performing all the center's revenue cycle tasks while the physician partners tend to want the ASC managed like their practices. Neither of these are valid management options as an ASC is a different type of healthcare business. Revenue cycle functions should now be performed by the ASC — either in-house or outsourced to an RCM company. It is important that the ASC choose an ASC-experienced administrator, preferably with both clinical and business office experience, who will have the autonomy to direct day-to-day operations but reports to the ASC's governing body, which should be comprised of hospital and physician representatives.
2. Software. Often hospitals want the ASC to use the same software as used in the hospital and physician partners recommend their practice software. However, an ASC is a unique entity that requires software specific to ASCs, both clinically and for revenue cycle management. When choosing an ASC-specific software platform, it helps to include hospital and physician members as well as representatives from the ASC's clinical and business office. Perform extensive due diligence, including checking references, as the software you choose will be one of the main contributing factors to the success or failure of the joint-venture ASC.
3. Business office staff. Focus on employing experienced front-office business staff to get the best results, preferably those with ASC experience. Depending on your caseload, you may not need a large business office staff as ASCs typically work shorter hours. Also, if revenue cycle management (RCM) is outsourced a smaller number of staff members are required than for in-house billing.
However, this does not mean the ASC should skimp on the in-house employees needed as they are an important part in the success of your ASC. The amount and type of employees needed will depend on whether the ASC outsources its RCM or whether management remains in-house. If outsourcing, the best scenario is the smooth integration of the front business office staff with the outsourced RCM team, both working seamlessly to maintain your ASC's financial health.
4. Revenue cycle management (RCM). Let's discuss RCM a bit further. Outsourcing RCM to a joint-venture ASC-experienced company is usually the best choice for a hospital-physician ASC partnership. These companies understand the specificities of ASC billing and are an impartial partner concentrating solely on obtaining optimal reimbursement for your ASC. Outsourcing helps avoid possible stress between hospital and physician partners. It also eliminates debates about using hospital or physician practice staff to perform business office and RCM tasks.
By acting as an impartial third party, the RCM company can work in partnership with the hospital and physicians, eliminating the possibility of potential dissatisfaction with the other group's RCM performance. When a joint-venture ASC chooses to outsource its RCM, this company can provide the presence of a "trusted" liaison selected by both parties to help steer the financial success of the new ASC. This is another area where significant due diligence should be performed, including carefully checking references with other ASCs using the company's services.
5. Budget. Third-party payers generally reimburse ASCs at a lower rate than HOPDs. Therefore, ASCs must operate more efficiently to maintain projected profit margins. However, ASCs must offer potential business office staff competitive salaries and benefits.
When establishing the ASC's budget, considering lower reimbursement and competitive staff expenses, the most effective way to maintain a healthy cash flow is to employ fewer staff. This means that business office staff must be able to perform all the RCM and business office tasks that hospital departments generally provide for their HOPDs and do so accurately and efficiently. These requirements are often the driving force for ASCs to consider outsourcing revenue cycle and other responsibilities.
6. Contracted services. Joint-venture ASCs have a distinct advantage when it comes to securing contracted services. Most of these services, such as pathology and radiology services, can often be contracted with the hospital partner. Also, it ensures that the hospital's managed care department is involved in negotiating the ASC's managed care contracts for these services. Since the hospital partner is often already contracted with the carriers that will provide coverage for the contracted services, the ASC should be better positioned to secure good reimbursement.
7. Audits. In an HOPD, revenue audits are regularly performed by the hospital's audit department or an outside accounting firm. Whether billing in-house or outsourcing RCM, ongoing audits of all ASC revenue cycle areas and processes should be performed weekly and monthly by the surgery center's management. Annual audits by an outside source are also recommended.
8. ASC metrics/KPIs. Key performance indicators (KPI) are measurable values that demonstrate how effectively an ASC is achieving critical business objectives. Recommended performance metrics to track include days in accounts receivable (A/R); aging A/R; days to bill a claim, which include days to receive operative note; days to code; days to post/submit claim; and percentage of clean claims versus denied claims.
Ongoing monitoring and tracking of your ASC's performance are important tools for measuring the success or failure of your revenue cycle process. These processes help detect where changes must be made while alerting you to areas that may be negatively affecting your revenue stream. It is important that month-end KPI reports are in a format that is easily understood by the hospital and physician partners.
Key takeaway: ASCs are unique, so treat them that way
Whether undertaking a conversion of an HOPD to a freestanding ASC or entering a hospital-physician partnership to develop a new ASC, perhaps the most important factor that will determine whether the facility is successful is understanding and appreciating that an ASC is a unique form of healthcare with its own rules and regulations. A successful joint-venture ASC has two key players, each with unique contributions. When they come together and make a committed and transparent effort to share the responsibilities and decisions for the ASC, they will also share in the unqualified success of their endeavor.
Caryl Serbin, RN, BSN, LHRM, is president and founder of Serbin Medical Billing, an ASC revenue cycle management company. Serbin Medical Billing's primary objectives are to provide the best coding, billing, and accounts receivable management services available to ambulatory surgery centers (hospital joint-venture, corporate-owned, or independent) and anesthesia providers. Ms. Serbin has been a leader in the ASC industry for 30 years. She was the founder of the first ASC-specific billing company.